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Hostile Takeover - Tender Offer and Proxy Fight



A couple, recently married purchased a new house. They were very happy.One day a rat entered into their house, but the lady ignored it as she thought what a little rat can do and she too had some soft corner on that rat.

But the rat don't have a soft corner on the lady, it showed its energy.


After one year...........

They had a baby and their house is full of guests.

Do you know who are the guests?

RATS . see the image ------------->


 

Did i divert from the topic of hostile hostile take over?

No, I am on the right track.

If you neglect once you have to suffer a lot, it is the moral of above story. The same thing applies to hostile takeover too.


 

It is a takeover which goes against the wishes of target company's management or board.

How it works?

There are two ways - The TENDER OFFER and PROXY FIGHT


 

tender offer is a public bid for a large chunk of the target's stock at a fixed price, usually higher than the current market value of the stock. The purchaser uses a premium price to encourage the shareholders to sell their shares. The offer has a time limit, and it may have other provisions that the target company must abide by if shareholders accept the offer.


 

 In a proxy fight, the buyer doesn't attempt to buy stock. Instead, they try to convince the shareholders(by giving then night party) to vote out current management or the current board of directors in favor of a team that will approve the takeover. The term "proxy" refers to the shareholders' ability to let someone else make their vote for them -- the buyer votes for the new board by proxy.


 

Examples:
 

  • The most famous recent proxy fight was Hewlett-Packard's takeover of Compaq. The deal was valued at $25 billion, but Hewlett-Packard reportedly spent huge sums on advertising to sway shareholders.(like giving them party and gifts and so on.............. (Censored)). - Successful

  • Swaraj Paul’s failed bid for Escorts and DCM (1984);- Failed

  • ICI’s attempt to takeover Asian Paints (1997); - Failed

  • India Cements/ Raasi Cements (1998); and - Successful

  • The Dalmia group’s purchase of stake in GESCO’s real estate company (2000).- Failed


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About the Author

CMA

Finance Professional (CWA) by profession, Faculty by passion and writing is my hobby. I like teaching Indirect Tax and Financial Management to CA/CWA and CS aspirants and ofcourse to every one who are interested with the subject. Visit tharunraj.wordpress.com for articles and updates on indirect ta ... Read more


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